Barring any last minute hiccups, the media regulator Ofcom will later this month publish its final word on its Pay TV Review, one of the longest-running consultations in the history of media regulation in the UK. After more than three years of work, hundreds of pages of analysis and enough financial modelling to satisfy even the most principled of economists, the intervention will start a process that could see BSkyB's stranglehold on premium sport and movies loosened.

It could allow several competitors to challenge Sky in the £4bn pay-TV market, leading to lower consumer prices for Premier League football.

In simple terms, Ofcom is in effect forcing Sky to wholesale its key sport and movie channels to rival operators at a regulated price. Its aim to unbundle Sky Sports and Sky Movies should allow competitors such as BT and the internet service provider Talk Talk to build their own pay TV businesses, potentially at Sky's expense, and could ensure that the BBC-backed Canvas project – designed as next-generation TV for terrestrial Freeview homes – gains real traction.

Here's a prediction: Ofcom will settle on a wholesale price that competitors find too high but that will enrage Sky nonetheless. And the whole thing will end up in the courts.

But even if Sky eventually has to wholesale its channels, it will seek to soften the blow by charging on to new platforms itself: you can expect Sky to consider launching its own next-generation service on terrestrial TV, for example, rather than simply watch BT and Talk Talk colonise that space. Much to the growing concern of Sky's rivals, Ofcom looks increasingly likely to allow it to retail its own channels on the Freeview platform as compensation for being forced to wholesale its premium content.

The stakes are high. Sport and movies have been the drivers of BSkyB's satellite success – Sky's principal shareholder, Rupert Murdoch, calls them the "battering ram". If competing operators are allowed cheap access to this key content, platform competition could really take off and Sky's dominance of pay TV may be seriously eroded. But not, of course, if Sky emerges as a leading retailer of premium content on rival platforms itself.

Action by Ofcom will inevitably have a political dimension, although the regulator would not want to hear it said. A Conservative government may not be as supportive of intervention as the incumbents. Ofcom may have its wings clipped by a new regime, and that could derail implementation of the unbundling.

The intervention could also affect the economics that underpin the Premier League, whose gargantuan income has principally been fuelled by the billions spent by Sky for the exclusive rights to screen top football matches.

For the commercial players, the stakes are particularly high. At a stroke, Virgin Media, the cable operator, which for historical reasons already has unbundled access to Sky's premium channels, albeit at a high price, could see its costs slashed under wholesale price regulation, with positive implications for its bottom line.

It is in the context of platform competition that Ofcom's intervention will have the greatest effect. There is a curious bipolar structure to the UK TV market, with 10m Freeview homes paying nothing for TV and close to 10m Sky homes paying an average of £490 a year. Surely there is a market in between the two? A "lite" pay proposition, offering Sky Sports and perhaps a range of video-on-demand content (think iPlayer on the TV), could be priced at around £20 a month – half of what Sky gets on average from its admittedly super-served subscriber base, but clearly a lot more than Freeview's average revenue per user, essentially no more than the TV licence fee.

Sky's control of the premium pay-TV market has stopped that from happening. Its business model has always been to pay a lot for sports and movie rights, and use these to entice subscribers in to expensive pay-TV packages. This buy-through model, where customers take channels they don't necessarily want in order to get the ones they do, has been the root of Sky's success. If the market were to be comprehensively unbundled, competitors could put together smaller packages of pay TV, potentially steal customers from Sky and take over the middle way.

The middle way has already produced road kill, however. Who can forget OnDigital, later ITV Digital? That would-be challenger to Sky and cable, owned by the ITV companies Carlton and Granada, used the digital terrestrial airwaves to offer a modest selection of channels through the aerial.

ITV Digital's failure was down to several issues, not least serious errors of judgment on the part of management. But the competing "free" set-top box strategy deployed by Sky to build its digital base was the clincher: Sky made it necessary for all digital platforms to subsidise receiving equipment; but only Sky, with its grip on premium content, could afford to do so.

Consider this simple fact: in 1997, the last year in the UK when all homes were analogue-only, Sky had 3.6 million TV subscribers and cable had 3.5 million; everyone else made do with four or five channels. Today, Sky has 9.2 million UK subscribers, Freeview is in just shy of 10m homes on the main set and cable (now virtually all digital) languishes at 3.7m.

So why does all this matter now? After all, with little more than 2m UK homes yet to take the digital TV plunge, we are well placed for digital switchover in 2012 and Freeview has worked a treat. The proximate reason for Ofcom's decision to intervene is because it received a formal complaint three and a half years ago from four would-be competitors to Sky – BT, Virgin, Top-Up TV (the marginal pay TV operator on DTT) and Setanta, the premium sports channel operator that subsequently went bust. But there is more to it than this. DTT is the only platform really in Ofcom's gift: it underpins the compact in UK broadcasting whereby the terrestrial networks get subsidised spectrum in return for providing an admittedly dwindling number of public services. Ofcom wants DTT to succeed, and it knows that this is far from assured.

For we are now in the next phase of the platform wars, and this time it is all about "control" rather than digital TV's promise of "choice". In response to consumers' preferences, platforms have innovated: cable has developed an extensive video-on-demand service, while Sky is promoting its Sky+ personal video recorders and its ever-expanding line-up of HD.

Freeview's basic proposition of "more channels" simply can't compete with all this, and BT's attempt to build a pay business on DTT through its Vision service has so far floundered. The terrestrial platform may struggle to climb much higher than its current level: in fact, without any radical change in direction, Freeview is likely to go backwards as consumers make increasingly more sophisticated platform decisions.

Efforts to promote the next generation of TV from within Freeview have been complicated by its shareholding structure – BBC, ITV and Channel 4, but also, for historical reasons, BSkyB. Unsurprisingly Sky is not convinced that Freeview needs to upgrade: if customers want TV 2.0 they can get a dish, Sky would argue.

Enter Canvas. All the PSB shareholders of Freeview have piled into the new venture, and have been joined by Five and two ISPs (BT and Talk Talk), which are likely to subsidise Canvas boxes from late this year or early next to offer, in effect, Freeview 2.0 – HD, PVR, all the catch-up TV you are likely to want, and a range of other services from third parties such as LoveFilm or even Facebook.

Canvas as a standard will be available to everyone, and its backers suggest that kit manufacturers will produce boxes for retail sale. In practice, it is highly unlikely that many consumers will pay as much as £250 for a box that is available for nothing from a Canvas ISP retailer such as BT or Talk Talk, provided customers enter into a contract for enhanced broadband and perhaps some additional content.

This is where the Pay TV Review becomes crucially important. If Canvas retailers want to compete against Sky and Virgin, they will need to bundle services and subsidise the kit. To do this, they will need revenue streams and a compelling consumer proposition. By getting cheap access on the wholesale market to Sky Sports, the likes of BT can offer a compelling mix of VOD and linear pay TV and tap that middle way in earnest – BT Vision on steroids.

It would be unsurprising, given all this, if Sky elected to enter the Canvas race. Rivals are worried that Ofcom's unbundling of its premium channels could prove a Pyrrhic victory for them – Canvas just might end up being hijacked by the most efficient, deep-pocketed and marketing-savvy media company on the block: Sky.

Will consumer prices for Sky Sports come down? For sure. Will BT and Talk Talk be the sole beneficiaries of Ofcom's intervention? Not if Sky has anything to say about it. And past experience suggests that it will.